We Move People and Freight
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F.18a ANNUAL INTEGRATED We move people REPORT 2016 and freight Rose Pettigrew, Terminal Manager Operations and Emma–Jane Wells, Rail Operator 2 | KIWIRAIL ANNUAL INTEGRATED REPORT 2016 Contents Overview of our business Management review Business review At a glance 4 Our first annual integrated Performance of our report 8 business units 16 Who we are and what we do 6 Integrated reporting concept: Value creation process 9 Chairman’s message to stakeholders 10 Our progress 2010–2016 12 Chief Executive’s report 14 Capitals review Governance review Statutory review How KiwiRail creates value 18 The KiwiRail Board 42 Financial statements 48 Helping to grow our exports 20 The KiwiRail Executive Team 44 Independent Auditor’s report 82 Financial 21 How we are governed 46 Key Performance Indicators 84 Increasing the value Vote Transport 86 of tourism 23 Employee remuneration 87 People 24 Directory 88 High Performance High Engagement 27 Assets 28 Inland ports and freight hubs 30 Know–how 31 eProtect: Innovative safety initiative helps save lives 33 Relationships 34 Working with communities to deliver results 36 Environmental 37 Delivering cost and energy savings 39 Outlook 41 KIWIRAIL ANNUAL INTEGRATED REPORT 2016 | 3 Overview of our business: At a glance Highlights from FY16 Awards Relationships • Chartered Institute of Logistics • 11% growth in import and export markets, and Transport “Most Innovative underpinned by strong relationships with ports Public Transport project” for and customers electrification and re–signalling of Financial the Auckland urban rail network * • $86 million underlying operating surplus • Railway Technical Society of • $105 million in tourism revenue, up 10% on last Australasia “Rail Project Award” year (with Siemens and Hilor) for • $27 million savings through productivity and electrification and re–signalling of efficiency initiatives the Auckland urban rail network People • 39% reduction in Lost Time Injury Frequency Rate • Deloitte Energy Excellence Awards and 33% reduction in Total Recordable Injury “Large Energy User Initiative of Frequency Rate the Year” for the Locomotive Fuel • 242 people participated in our Leadership Conservation project Programmes • Northern Explorer nominated Assets for the 2016 “Holiday & Tours • $254m invested in renewal and upgrade of Specialist Award” by the UK– network, property and rolling stock based Luxury Travel Guide Know–how • 29% reduction in mainline derailments, improving • TranzAlpine is ranked No 9 in The service reliability for customers Luxury Travel Expert’s Top 10 Greatest Train Journeys in the Environment • Reduced heavy vehicle impact of 1.1 million truck World trips, saving 77 million litres of fuel and 209,000 • The Coastal Pacific service is tonnes of CO2 emissions ranked No 2 in Lonely Planet’s The • 3 million litres of diesel saved in FY16, following Best Train Journeys You’ve Never the introduction of a fuel conservation programme Heard Of *Operating surplus before significant items is a non-GAAP measure used by management to assess the performance of the business and has been derived from KiwiRail’s group financial statements for the year ended 30 June 2016. 4 | KIWIRAIL ANNUAL INTEGRATED REPORT 2016 Overview of our business: At a glance At a glance We move people We help commuters make more than 27 million low– carbon journeys each year We carry more than one million tourist passengers each year We enable passenger growth of more than 20% per year in Auckland We move freight We move around 18 million tonnes of freight each year We carry around 16% of New Zealand’s total freight task (tonnes–km) We transport around 25% of New Zealand’s exports KIWIRAIL ANNUAL INTEGRATED REPORT 2016 | 5 Overview of our business: Who we are and what we do Our Vision: Who we are Trusted Kiwi–owned logistics partner and what we do growing New Zealand Long–term Manage 3,400 employees viability 18 thousand hectares of Economy–wide and land geographically diverse Investing in our jobs growth corridors Enable 27 million Provide on–going commuter trips Working with training to develop in Auckland and our customers leaders, improve safety Wellington to reduce supply and create culture chain costs 3 Scenic Journeys’ Skilled and safe experiences between workforce Auckland and Support Greymouth conservation One of the top rated Promote rail safety 3,087 signals train journeys in the world Custodians of rail 1,476 public level heritage for the crossings generations 3,500 km of track operated and maintained 6 | KIWIRAIL ANNUAL INTEGRATED REPORT 2016 Overview of our business: Who we are and what we do 9158 9158 1,322 bridges Connect customers to ports around New Zealand and the global market place Reduce heavy vehicle impact by Transport 25% 3 ships more than 1 million of New Zealand’s truck trips per year exports Extension of SH1 across Cook Strait 60–70% less 4,855 wagons emissions than 800,000 passengers road 100 Tunnels 4,000 sailings per year Less congestion and safer roads 302 locomotives KIWIRAIL ANNUAL INTEGRATED REPORT 2016 | 7 Management review: Our first annual integrated report Our first annual integrated report Welcome to KiwiRail’s first Integrated KiwiRail has evolved over the past six We also discuss material issues that Report, which uses the internationally years with a far greater focus on our are likely to impact our ability to create recognised Integrated Reporting customers, our people and our strategic value in the short, medium and long framework to explain our performance role in the Government’s Business term. These issues are relevant to both as a business for the year to 30 June Growth Agenda. Taking an integrated the business and our stakeholders, and 2016. approach to the business helps are detailed throughout the report. drive real commercial value for our The report explains how KiwiRail uses While this is the first time KiwiRail stakeholders and customers. six forms of capital (financial, people, has used the Integrated Reporting assets, know–how, relationships and Our business strategy and value framework, we will look to refine our environmental) to create value for creation model is summarised on pages approach in subsequent years. More shareholders and customers. 18 and 19, and a short overview of information on the integrated reporting strategic challenges and opportunities framework can be found at We provide an overview of our activities on page 41. Measures of our progress http://integratedreporting.org for each capital input and demonstrate against key performance indicators and how each area contributes to our vision financial statements are provided from to be a “trusted Kiwi–owned logistics page 48 onwards. partner growing New Zealand”. Customer relationships Financial performance Employee relations Commercial focus Service performance Transport resilience Operational efficiency Public safety Worker health & safety Energy and carbon 8 | KIWIRAIL ANNUAL INTEGRATED REPORT 2016 Management review: Integrated reporting concept: Value creation process Integrated reporting concept: Value creation process FINANCIAL PEOPLE RELIABLE We move ASSETS people Inputs Outcomes SUSTAINABLE We move KNOW–HOW freight RELATIONSHIPS VALUABLE ENVIRONMENTAL Statement of Responsibility We, the Board of KiwiRail, acknowledge our Audit New Zealand has provided a statement responsibility to ensure the integrity of this of assurance for the financial statements in this Integrated Report. In preparing and approving report, but we have not sought external assurance the content of the report, we are confident that of the contents of this Integrated Report. it aligns with the principles of the International Integrated Reporting Framework. John Spencer Dame Paula Rebstock Chairman Deputy Chair KIWIRAIL ANNUAL INTEGRATED REPORT 2016 | 9 Management review: Chairman’s message to stakeholders Chairman’s message to stakeholders My term as Chairman of the KiwiRail board Our commercial focus has benefitted from finishes at the end of October and this a cultural shift within the organisation. Customers are year’s financial results are a timely marker KiwiRail has a clear eye on the future while in what has been a significant, multi– it honours its past. A commitment to strong at the core of our year transformation programme for the engagement with our people and unions “ organisation over the past six years. and a strengthening of leadership across all transformation and parts of the business will continue to grow Despite numerous challenges and setbacks, I would especially the value of rail in New Zealand. the achievements have been significant in like to thank a relatively short period and many of the I am proud to have been part of the gains impressive. I see the 69% increase in KiwiRail journey over the past six years our long–term import/export freight as an indicator of the and would like to acknowledge the strength customers for their customer focus that KiwiRail now brings to of our people and commitment of our all of its operations. Building resilience for shareholders, who have supported the ongoing partnership those customers has also been a driving integral role played by KiwiRail in New as KiwiRail evolves force as seen by the large number of aging Zealand’s transport system. bridges that have been replaced, the more KiwiRail inherited a business that had and changes. than $2 billion invested in metropolitan suffered significant underinvestment, was networks since 2010 and the 85% reduction asset–centric and was often subjected in derailments over this period.